Correlation Between Cisco Systems and Franklin FTSE

Can any of the company-specific risk be diversified away by investing in both Cisco Systems and Franklin FTSE at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Cisco Systems and Franklin FTSE into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cisco Systems and Franklin FTSE Japan, you can compare the effects of market volatilities on Cisco Systems and Franklin FTSE and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Cisco Systems with a short position of Franklin FTSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cisco Systems and Franklin FTSE.

Diversification Opportunities for Cisco Systems and Franklin FTSE

0.79

Correlation Coefficient

Cisco Systems  Franklin FTSE

Poor diversification

The 3 months correlation between Cisco and Franklin is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and Franklin FTSE Japan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin FTSE Japan and Cisco Systems is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Cisco Systems are associated (or correlated) with Franklin FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin FTSE Japan has no effect on the direction of Cisco Systems i.e., Cisco Systems and Franklin FTSE go up and down completely randomly.

Pair Corralation between Cisco Systems and Franklin FTSE

Given the investment horizon of 90 days Cisco Systems is expected to generate 0.86 times more return on investment than Franklin FTSE. However, Cisco Systems is 1.17 times less risky than Franklin FTSE. It trades about 0.27 of its potential returns per unit of risk. Franklin FTSE Japan is currently generating about 0.12 per unit of risk. If you would invest  4,942  in Cisco Systems on September 13, 2024 and sell it today you would earn a total of  917.00  from holding Cisco Systems or generate 18.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Cisco Systems  vs.  Franklin FTSE Japan

Cisco Systems

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cisco Systems are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Cisco Systems displayed solid returns over the last few months and may actually be approaching a breakup point.

Franklin FTSE Japan

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin FTSE Japan are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak forward-looking indicators, Franklin FTSE may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Cisco Systems and Franklin FTSE

The main advantage of trading using opposite Cisco Systems and Franklin FTSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cisco Systems position performs unexpectedly, Franklin FTSE can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Franklin FTSE will offset losses from the drop in Franklin FTSE's long position.

The idea behind Cisco Systems and Franklin FTSE Japan pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.